When it comes to charitable giving there are multiple layers of intertwined motivations that are both personal and philanthropic. A financial planner needs to perform a balancing act when assisting a client with overcoming conflicting desires in charitable giving. This article discusses how financial planners will need to help their clients adapt to changes in the tax law dealing with charitable gift giving. There will also be changes to how clients will handle charitable remainder unitrusts (CRUTs). This article explains the different techniques advisers can use to help balance the client’s interest taking into account the interest of the beneficiary charity as well. It discusses the different ways to structure split-interest gifts. This article will hopefully provide more information about the importance of planning ahead when making charitable gifts.

The Internal Revenue Service (IRS) has issued a private letter ruling holding that the generation-skipping transfer tax (GST) exemption will not be affected by a proposed modification to a trust. In the articles example the Trustee and Beneficiaries agreed to a proposal to modify the method of calculating a unitrust amount. The article discusses how the modification was administrative in nature and was not considered to be a shift in beneficial interest. State statute permitted the modification and it did not shift the beneficial interest to a beneficiary on a “lower generation than the persons who held the beneficial interest prior to the modification.” The private letter ruling also held that the modification would not subject the trust to any gift tax and there would be no realization of gain or loss under IRC Section 1001.

As states look for ways to raise new revenue, many have turned to a dubious tactic in which tax laws are amended and made retroactive to force once paid up persons to cough up more dough. In Washington, the state retroactively applied estate tax changes back to the year 2005 which forced many to reopen returns and potentially pay additional money to state. The law was challenged by taxpayers but the Supreme Court of Washington upheld the legality of the statute. The case was appealed to the U.S. Supreme Court and is currently awaiting a response to their petition for certiorari which argues that the retroactive changes are unfair and violate the due process of those affected. If this ruling is affirmed, then the ability of states to reach back in time for more money could unleash a flood of activity by legislatures looking to fill budget gaps. This would be a massive headache for estate planners since it would create a shifting goal-line and make it almost impossible to know the exact tax burden an estate will carry.

Now that marriage is universally available to couples, many new choices must now be made that had, up until now, applied only to opposite sex couples. Some of the most important are the tax choices that must be made while married such as joint filing or the estate tax exemption that may be transferred between spouses. Social Security is also a new playing field allowing newly married couples to use such strategies as "filing and suspend" or being granted survivor benefits. In total, same sex couples now have access to the same benefits as other married couples and need to be brought up to speed on the potential advantages, and disadvantages, to all aspects of a person's estate after marriage.

The IRS is expected to issue proposed regulations by the end of 2015 that would restrict intra-family transfers that are designed to get valuation discounts. Utilizing discounts on family transfers of closely held business and real estate interests has been a primary estate planning technique used to reduce gift and estate taxes for many decades. The value of the transferred interests often comes in the form of non-voting stock or non-controlling limited partnership or assignee interest. The IRS has taken the position that these transfers are not appropriate for a family setting and are done only for tax planning. In the past the IRS has had limited success in combating these transfers, though that might all change with the new regulations that many expect will come out in the future.

When people contemplate taxation they often think about income and property taxes, yet there are a lot of other way Americans are taxed at the Federal and State level that we might not know about. The author of this column discusses how the goods and services that we buy are subject to a different tax at just about every stage of production and distribution. There are a wide variety of taxes imposed from the manufacturing stage up to the final retail sales stage. The burdens of paying these different levels of taxes are often borne by the consumer in the form of higher prices for goods and services.

One of the common habits among the ultra wealthy might surprise some. The habit is charitable giving with upwards of %98 of high net worth households being philanthropically active. However, many of these families give without consulting advisors which may deprive them of benefits that will make every altruistic dollar go further. Different methods of giving may create tax advantages to the donor and some entities may be established, such as a trust, that will allow greater control over the way the donated property is used. Proactively talking about charitable gift planning might yield great benefits to the client and any good causes they seek to advance.

Moving after retirement has become increasingly popular over the years but it may have unintended consequences for estate planning. Sixteen states have estate taxes that vary in exceptions allowed and rates imposed after death. A state such as New Jersey has an exception threshold under $700,000 and maximum tax rates of %14 which could dramatically alter the value of an expected bequest if a retiree had moved from a tax free state. Whenever your client talks about relocation make sure they understand the potential consequences moving may have and advise them how to minimize the potential impact.

Placing faith-based arbitration clauses into trusts has recently been growing in popularity. When a Florida couple claimed the gift tax exclusion for money that they placed into a faith-based irrevocable “Crummey” trust, the IRS challenged them. The IRS argued that because the trust required beneficiaries to arbitrate disputes before a “beth din” (a rabbinical court in Judaism), the beneficiaries did not possess the “present interest” necessary for the gift-tax exclusion. The Tax Court overruled the IRS, ruling that including a faith based arbitration clause does not disqualify a settlor from claiming the gift tax exclusion. Resolving disputes through faith based arbitration is becoming increasingly popular in Christian, Muslim, Jewish and other religious communities.

Only 15 states currently have estate and gift taxes but that number will likely shrink as legislatures make it a priority to repeal or curtail the assessments. Critics of the taxes claim that it slows economic growth and many states agree as Indiana and Tennessee have accelerated repeals while Maryland and New York are increasing exemptions. Taxes will be a major factor in all estate planning so these changes should be carefully monitored going forward.